In an interview with ET Now, Hitesh Goel, Analyst, Kotak Institutional Equities, talks about the February automobile sales and how various auto stocks will perform in the coming months. Excerpts:

ET Now: What do you make of Tata Motors February domestic sales? Do you think this downtrend will continue?

Hitesh Goel: Tata Motors stock movement depends on JLR rather than on domestic CVs. The standalone number is making a loss. Therefore, it is totally contingent on JLR. We believe that CV sales will remain under pressure because the macro environment is very challenging. Unless the interest rates come down or there is a good monsoon which can spur up consumption, CV sales will remain subdued.

As far as JLR is concerned, there are a lot of things going in favour of Tata Motors. We have all the new models coming through. From February onwards, we will start seeing full ramp up of these models. The fourth quarter should be very significant for JLR. Therefore, we believe that Tata Motors should do well. It is our top pick in the auto space.

ET Now: Do you think that with the US sales for JLR being strong, it can clock in 35,000 in volumes for February?

Hitesh Goel: Yes it can. Dispatches should be higher than that because right now all new models are getting dispatched across the globe. Therefore, we are seeing traction on the four-wheel drive, models that were launched in the US. The new range is also is picking up across markets. Therefore, this is just a start of the new model launch which is going to start performing for JLR over the next few months.

ET Now: TVS and HeroMoto sales have been sluggish for February. What is your view?

Hitesh Goel: In two wheelers, we are seeing that after the festive season, demand has come down. This is also largely because inflation is quite high in the economy and due to this, a pent-up demand is being created and people are not buying two wheelers. However, the key is to look out how monsoons will play out. The second half of the monsoons was weak, but we have to see the upcoming monsoon in the June-July period. If that is normal, we will see pick up in two wheeler sales.

ET Now: The Mahindra & Mahindra tractor sales have been sub-15,000. Do you think a recovery in volume will take time?

Hitesh Goel: For the next year, we are looking at a single digit growth of 4-5% on tractors for contingent normal monsoon. The key driver has been poor - the second half of the monsoon which has impacted tractor sales especially in the January to February period. The management cannot do much about it. Mahindra has a very high market share in the south and west markets where the monsoons have been weak. We have seen drought conditions in Maharashtra, which has impacted sales. Â If the monsoons are normal in these regions, we will see a market share pick up for Mahindra & Mahindra. Moreover, the tractor sales could surprise on the positive side. Tractor sales also depend to a large extent on how the non-agri space is moving. This is because tractor hiring activity will pick up and that boosts the income of farmers. That is not going to pick up in the near term. Therefore, we do not expect a double digit growth in tractors, but a single digit growth, which is contingent to normal monsoon, should happen.

ET Now: Maruti shares are down 10% for the last month. What is your call?

Hitesh Goel: With Maruti, the issue is that overall care volumes are not expected to grow a lot. The management has categorically stated that next year they are not looking for more than a single digit growth. That is an optimistic number given the sluggish economy. Urban consumers are facing a very high inflation. Therefore, they are delaying the purchase of higher discretionary items. Maruti is still gaining market share largely because Swift and Dzire have been doing very well for them.

Once Honda Amaze, Ford EcoSport are launched, there could be some pressure on Maruti's market share. Yen has played out well for them and that will have a positive impact on margins for the fourth quarter, but margins sustenance will depend on volume growth. Discounts are going up in the market which is a cause of concern. Therefore, volume growth is the key. The yen may fluctuate. It is very difficult to give a call on the yen, but discounts are going up in the market. Therefore, if volume growth does not improve, it is a concern.